cultural limitations to quality

SiG

Cultural limitations to quality

How and corporate culture determines the achievable target quality

- or –How much quality does our corporate culture permit?

Dr. Horst Walther, Business Advisor Operational Risk ManagementMember of the VCB & Company LLP, London,

SiGwww.si-g.com7. Apr 2023 4

agenda

motivationWhy do we have to deal with corporate culture?

historyWhich work has been done on this topic to today?

definitionWas is corporate culture after all?

originWhere does corporate culture come from?

diagnosisHow to diagnose corporate culture?

designHow can we create a quality culture?

examplesThe „hidden champions“ - success through corporate culture

outlookwhat is left to be done?


Motivation – 1. Customer relationshipWhy do we have to deal with corporate culture?

The competition in most industries is determined by the increasing globalization and is gaining in intensity.

Many of the competing products and services are in competition have become increasingly similar.

Quality differences can often only be experienced on the basis of "faith factors" (Zeithaml, 1981).

Thus resulting in the personal contact between employees and customers, as an increasingly important function.

Success in business is increasingly dependent on good relations between employees and customers.

So it also depends on good relation processes between management and staff.


MotivationWhy do we have to deal with corporate culture?

Increasing pressure on innovation and cost caused by competition...

requires an effective and efficient use of available power potential and resources from businesses and organizations .

The resulting increased performance pressure ... demands a special attention for the development and

maintenance of personal commitment from employees.

The corporate culture ... thus moves increasingly into the focus of economic and

general social interests.

The corporate culture and thus the quality of work ...

is more often attributed to be able to improve process and product quality, the competitiveness of companies and the satisfaction of all stakeholders.

SiGwww.si-g.com 7207. Apr 2023

Motivation – 1. process maturityWhy is CMMi level 2 so high?

1 initial

2 managed

3 defined

4 quantitatively managed

5 optimizing

The employees must adopt the common values

of "discipline" and "consequence". This is

means a cultural change.*

Why isCMMi level 2

so high?

* Ralf Kneuper, CMMI, dpunkt Verlag

SiGwww.si-g.com 8207 Apr 2023

Motivation – 2. the big reluctanceOnly 13 % of all employees are committed*

Only 13 % of all employees confirm, that they are really committed to their work.

Demotivated employees according to a survey of the consulting firm Gallup cause a yearly economic loss of 220 billion Euro in Germany .

The levels of Motivation are …

* neuer Gallup-Engagement-Index 2008

Can top quality achieved through „obedience“?

CommitmentInternalised Motivation

EnrolmentAwarded Motivation

ComplianceForced Motivation


HistoryWhich work has been done on this topic to today?

Taylor's scientific management began the systematic treatment of quality .

Early the importance of culture as a driver has been assumed.

TQM (Deming and Ishikawa) made it an essential ingredient.

The move from customer focus toproduct focus shifted it to the center.

Its importance is accepted today.

But the “how to”still causesheadaches.


HistoryEFQM Excellence Model®

European Foundation for Quality Management (EFQM)


HistoryEFQM Excellence Model®

Culture

European Foundation for Quality Management (EFQM)


DefinitionWhat is corporate culture after all?

“An organization’s widely shared values, symbols, behaviours, and assumptions”

Goffee & Jones, The Character of a Corporation (2003)

“a pattern of basic group assumptions that has worked well enough to be considered valid, and, therefore, is taught to new members as the correct way to perceive, think, and feel”.“Stated values” vs. “Tacit assumptions”

Edgar H. Schein, Organizational Culture and Leadership (2004)

Culture = the way we do things around here...(Ouchi, 1979)


observable symbols,

ceremonies, stories, slogans,

behaviours, dress, physical

settings, …

Underlying Values, Assumptions, Beliefs,

Attitudes, Feelings

DefinitionWhat is corporate culture after all?

visible

invisible

The iceberg metaphor puts emphasis the

weight of the invisible part of the corporate

culture.


DefinitionHow do we deal with each others?

internal orientation external orientation

me colleague

subordinate

superior

corporation

competition partner

customer supplier

cooperation

politicsmobbing<

leadership

leadership

industry sector

knowledgeservice

sourcing

winning

attitude

verticalintegration


origin & impactHow is corporate culture created?

Its core are a corporations guiding values, it’s ethics. The corporate culture …

influences a corporations action directly and often unconsciously.

resists to direct engineering. is confirmed or changed by all decisions or actions.

Our actions offspring from several sources: founder, market forces, cultural embedding, …

actions actions

values values

short term

medium termx---

influence

---

no direct engineering possible

has impact on all

actions – often

unconsciously


origin - corporate culture & market How efficient, how flexible should the corporation be?

high

low

low high

speci

alis

ati

on

market dynamics

2 4

specialisation versus flexibility

1 3



high

low

2

1 3

4

specialisation versus flexibility

low high

speci

alis

ati

on

market dynamics

1 3



1. Quadrant – Generalist in a static environment High competition Only the strongest survives: competitive through size Universal success models: shark, dinosaur

2. Quadrant – Specialist in a static environment Conquering ecological Niches Highly adapted efficiency specialists Niche dwellers: polar bear, camel

3. Quadrant – Generalist in a dynamic environment cut-throat competition Flexible process innovators: wolf survival under changing conditions, social system

4. Quadrant – Specialist in a dynamic environment Taking advantage of „windows of opportunity“ Agile Specialists, Nomads, opportunity picker, migrant birds,

swarm

increasing market dynamics require higher flexibility.


5 %

35 %

60 %

5 %

55 %

40 %

origin - from mass market to individualized productsthe Organisation responds to market needs

Taylor pyramidtraditional functional hierarchy

Experts diamondautonomous service network

= Information flow

strategic(top management)

managerial(middle management)

operational(clerical work)

strategic(top management)

operational(simple work)

value creation(Experts-Networks)

Increase ofProcess autonomy

communication-/

decisionbottle necks

autonomous decisions,

multiple, direct communication flows


origin – corporate culture & market influence of the Organisation on the culture.

Lead by orders and rule Tightly managed

departments Remuneration on hours

works Penalties on failures Secret knowledge Safe jobs through rigid

structures Working for money

Vertical communication only

External control of work Predefined jobs Operation & control are

split Distrust

Lead through principles and values

Autonomously acting teams. Remuneration based on

success Rewarding success Shared knowledge Confidence through cultural

integration Self-confidence through visible

contribution to success Direct peer-to-peer

communication Self controlled work Evolving (self organising) jobs Self optimizing processes Trust

Taylor-pyramid vs. experts-diamond

Taylor-pyramidTaylor-pyramid experts-diamondexperts-diamond


origin – corporate culture & marketLeadership in a dynamic environment

In a dynamic environment multiple complex decisions have to be made.

In the Taylor pyramid this situation leads an information overflow.

In the experts diamond peers communicate directly. Management functions merge with operational functions

to independent self optimising processes. Experts led by principles follow their own autonomous

decisions. They make autonomous but visible decisions. The „boss“ becomes a coach rather than the „1st clerk“. Mutual respect of personality and competency replace

daily order and detailed rules. The culture has to adapt from “feudal” to “team

oriented” The deal is: „autonomy plus transparency“.


origin – corporate culture & marketmarket dynamics and organisation

In a static environment the best adapted specialist wins.

In a dynamic market the adaptable generalist is the winner.

Only a few corporations are equally well positioned in both environment.

But in fact successful corporations need the power of the two distinct cultures. Highly efficient processes

need an industrial organisation Market driven

substructures need an experts network organisation

To be robust against dynamics corporations need the „power of two hearts“.


DiagnosisHow to determine corporate culture?

A corporate culture can be grasped already intuitively using a few key parameters.

A systematic determination can be done using different cultural model.

However no commonly accepted universal cultural model has emerged yet.

The competing values framework (CVF) is currently the best supported model around.

Questionnaires and the Organizational Culture Assessment Tool (OACT) can be used.

For the diagnosis of a quality culture a more focused model is still missing.

In order to analyse the quality culture of a corporation an appropriate model, questionnaires and a Tool are still missing.


Diagnosis - policies, procedures & practicesWhere does corporate culture becomes obvious?

Success How is success measured

Respect How do you demonstrate respect for colleagues, customers, vendors, the community

Problems How do you solve customer and employee problems

Decisions How are decisions made

Innovation How to do encourage new ideas and innovation

Time How to you weigh the relative importance of short term profitability versus long term goals

Rewards How are achievements rewarded A few parameters already disclose the cultures

nature.


Diagnosis determining culture types by the competing values framework.

Clan

Hierarchy

Adhocracy

Market

organic

mechanistic

inte

rnal

exte

rnal

Der The type of culture are key to an effective organization.


Diagnosis determining culture type using the competing values framework

Types of culture are key to an effective organization.

Strength and consistency of corporate culture are less important.

There may be a consistent but weak culture.

However, no strong but inconsistent culture.

There are questionnaires and measurement tools available.

clan

hierarchy

adhocracy

market

organic

mechanical

inte

rnal

exte

rnal

Dominant Attributes: Cohesiveness, participation, teamwork. sense of family

Leader Style: Mentor, facilitator, parent-figure

Bonding: Loyalty, tradition, interpersonal cohesion

Strategic emphasis: Towards developing human resources, commitment, morale

Dominant Attributes: Creativity, entrepreneurship, adaptability, dynamism

Leader Style: Entrepreneur, innovator, risk taker,

Bonding: entrepreneurship, Flexibility, risk

Strategic emphasis: Towards innovation, growth, new resources

Dominant Attributes: Order, rules and regulations, uniformity, efficiency

Leader Style: coordinator, organizer, administrator

Bonding: Rules, policies and procedures, clear expectation

Strategic emphasis: Towards stability, predictability, smooth operations

Dominant Attributes: competitiveness, goal achievement environment exchange

Leader Style: decisive, production- and achievement oriented

Bonding: Goal orientation, production, competition

Strategic emphasis: Toward competitive, advantage and market superiority

The traditional family business

The innovative start-up company

The flexible high-performance enterprise

Government

conglomerate

dinosaur


DesignHow can we create a quality culture?

TQM thinking - quality cannot be achieved in isolation. Leadership - the top management as a visible

example Consistent action - contradictions quickly spoil all

effort. Orientation - the customer, rather than the product. Empowerment - Quality is everybody's job. Personnel - select carefully and train them. Feedback - immediately and relentlessly authentic. Transparency - goals, successes, deviations are public. Rules - and a few clear, but strictly binding rules. Promotion - rewards for contribution to the corporate

success. Empathy - Anyone who is committed belongs to "us". Flow - balance of challenge and support

The content is not new – the implementation is the challenge!


examplesculture is a corpration‘s strongest power.

It may also be a serious obstacle to success: It resists a direct engineering. It can be only changed in the medium and long term. It affects the company directly and often unconsciously. Only a few companies managed to control these

instruments. Success stories…

In search of excellence –Tom Peters found early hints to this phenomenon.

Toyota – where Taichi Ohno created the lean production. Apple – Apple is Steve Jobs. Company and founder form

an organic whole. Google – a rule based market, entrepreneur’s spirit, small

cells form part-time start-ups – and can move up. Hidden champions – less known, small or medium sized

companies, world market champions in small segments.


Examples – the hidden championsthe success strategies of lesser know world market leaders

The success of German exports does not originate from major German players.

But to a group of companies which are world market leaders in their segments.

Although little known, they are unsurpassed in the world for decades.

The "Hidden Champions" prefer to work in a clandestine way.

In Germany alone there are over 500.

Innovation is their outstanding feature.

Nearly all of them have achieved world market leadership.

Because they all had started as pioneers.

For technological aspects or the way they approached their markets.


Examples – the hidden championstheir success factors

Corporate objectives active, aggressive, optimistic focused on core competencies sworn in on common goals and

values

The market narrowly defined approached in a highly

specialized way Deep assortments - not wide high degree of specialization unmatched perfection their market is the world

The customers Direct customer contact Long-term business Customer loyalty more important

than short-term profit

Innovation 2 Sources: customer and

specialization Focus on a specialty areas Set the pace with new innovations

The competition Actively seek the performance

enhancing confrontation with the strongest competitors.

Always at least one point better than the competition.

Compete on service and quality.

The partners core competencies Long-term relationships mutual trust Follow the customers around the

world


Examples – the hidden championstheir success factors

The Team Very strong and unconventional

corporate cultures. Strong identification with the

goals and values of the company. Permanent staff: low turnover,

low absenteeism Little friction. “During weekends, we beat our

competitors." Key factor in employee training, Massive investments into

trainings, Learning on the job more

important than formal programs. Very careful staff selection. new employees are tested in the

workplace. Newbies either stay long time or

leave soon again.

The executives inexhaustible Power and

Energy clear priorities Fully business focused

Leadership style: authoritarian in the

values , goals, core competencies

participatory and leaving freedom of choice in the details of implementation.

Work on the flow principle.

Appreciation of achievements play a prominent role.

A “sworn community" Enterprise and founder

personality always form a whole.


OutlookWhat is left to be done?

Use the power of the – right - corporate culture! A strong Q-culture complements the Q-craft, it is not

replace it. Follow the example of the hidden champions! Be patient - cultural change takes time! Start with a diagnosis! Stay honest - otherwise it goes wrong! But try to change it only if you have the means to do so!

The corporate culture is the strongest corporate force. To change it, you must start at the top of the company.


Niccolo Machiavelli(1469-05-03 – 1527-06-21 in Florence )

„It is impossible to convince a man, whose way to act made him

successful, he would be well advised to act

differently henceforth. This is the reason why a mans luck turns; when the time change but he doesn’t change his way

to act.“


Louis GerstnerIBM chairman of the board and CEO from April, 1993 until 2002.

From a former CEO of IBM…

“I came to see, in my decade at IBM, that culture isn’t just one aspect of the game - it is the game.”

- Louis Gerstner, “Who Says Elephants Can’t Dance” (2002)


rhetorical questioncan we afford to deal with corporate culture?

Why don‘ t you

mend the fence?

No time – need to catch

chicken!


questions - acknowledgements – suggestions?


Attention

Backup slides

cultural limitations to quality

Documents

competing

world market

corporate

strategic

leader style

dominant attributes

corporate

quadrant specialist